CEOs in the firing line

Boards and shareholders proved in 2012 that they will show no mercy when it comes to chief executives who do not live up to expectations.

Patience is something investors cannot afford in tough economic times and more heads are expected to roll in 2013 if corporate leaders are perceived to be slipping up.

The trend is also a reflection of the shrinking average shelf life of a company boss.

Goldman Sachs says the median chief executive tenure is now about four years. The turnover rate for top-100 company chiefs has averaged 15 per cent compared with 9 per cent in the previous five-year period.

Billabong
chief
Derek O’Neill
,
Boral
boss Mark Selway and Perpetual chief Chris Ryan all left suddenly in 2012 after falling out with investors and boards.

While directors embark on a rigorous selection criteria when they recruit a new boss, disagreements over strategy are expected to continue claiming scalps, particularly in industries under pressure such as retail, construction, media and financial services.

The chief executives of major companies expected to come under the most pressure this year are listed below. While some have fallen out of favour, it should be remembered that all are respected executives in their own right and had stellar careers that got them to the top in the first place. Some inherited problems, made errors of judgment or face distracting takeover bids and powerful investors who will try to undermine them. There will be others during the year that are not so obvious yet.

Ten Network
’s powerful board is standing by him for now but chief executive
James Warburton
may need a miracle to survive another year as he struggles to turn the television network around. Ten has indicated in the past that it will show no mercy after a predecessor, Grant Blackley, was shown the door in 2011. Ten says Warburton is there to stay but there is widespread talk within the industry he may be gone by Easter unless the latest ratings figures show a meaningful turnaround. Warburton’s tenure at Ten has been controversial from the start after a court battle with his former employer,
Kerry Stokes
’s
Seven
, which delayed his starting date. When he took the helm 12 months ago, Warburton faced some of the worst advertising conditions in decades and presided over a number of ratings flops that contributed further to the network’s decline in revenue and market share. Two capital raisings have not helped. Ten’s shares have fallen about 70 per cent since he became chief executive. Warburton’s position has not been helped by Ten’s powerful and complex board. Billionaires
Lachlan Murdoch
,
James Packer
,
Gina Rinehart
and
Bruce Gordon
all hold significant stakes in the company. Warburton, 42, made his name as Seven’s chief sales officer where he was handpicked by
David Leckie
, who was seeking a young gun to help him revive
Kerry Stokes
’s television empire. He may regret ever leaving.

Related Quotes

Company Profile

Alan Joyce
ended 2012 on a high note when the competition watchdog backed
Qantas
’s proposed tie-up with Middle Eastern carrier Emirates. It was a welcome piece of good news for the long-time airline chief executive who has faced an uphill battle for the past year as the airline struggles to turn around its loss-making international operations despite a robust domestic operation. Joyce is under assault from all sides.

Many in the airline’s heavily unionised workforce would like him removed and powerful new international competitors and a strengthened domestic rival in Virgin are adding to the pressure. Meanwhile, a consortium including former Qantas chief
Geoff Dixon
have taken a stake in the airline with the aim of undermining Joyce’s strategy amid rumblings about a takeover bid. Irish-born Joyce is resilient, though, and has the backing of his board as he stands by his strategy and looks to the Emirates alliance to help fix its international problems. With Qantas shares falling below $1 for the first time earlier this year, some investors said he should go but others believe he is doing all that can be done to turn the international business around in a tough market.

There have been rumblings that
Cameron Clyne
’s days at
National Australia Bank
have been numbered for months but that speculation was hosed down before the company’s annual shareholder meeting in late 2012. Chairman
Michael Chaney
is standing firmly by his man for the time being despite shareholder discontent. The main problem for Clyne has been the bank’s loss-making UK operations that he inherited when he took the job. Determined not to sell the assets in a fire sale, Clyne has set about restructuring the operations although many investors think he was too slow in addressing the problems in the first place. NAB’s share price is underperforming the other major banks and profits are declining, largely because of the UK problems. However, the domestic operations are performing in line with his competitors. NAB’s net profit fell $1.1 billion to $4.1 billion in 2012.

Paul Zahra
was thrust into the top job at
David Jones
in 2010 after his predecessor, Mark McInnes, left suddenly after a sexual harassment scandal. The timing was terrible for Zahra, whose promotion coincided with a sharp drop in discretionary spending, the worst retail conditions in decades and a boom in online sales. McInnes’s departure also triggered an exodus of talented executives at the group. Since then, David Jones has underperformed rival Myer, although it reported its first quarterly sales growth in October in a year. Zahra, who has been forced to reinvest back into service and technology, is yet to convince the market he has the right stuff to bring David Jones into the 21st century.

The accomplished retail executive who made her name turning things around at Target Australia has a herculean task trying to fix surfwear retailer
Billabong
.
Launa Inman
took on the role after her predecessor,
Derek O’Neill
, left in September 2012. She has inherited a mess and has not yet convinced investors her long-term turnaround plan will be enough to resolve the problems. A sharp profit downgrade the week before Christmas has not helped, particularly as it coincided with the fifth takeover approach for the company in a year. Inman is trying to balance her operational duties with the distraction of takeover bids. The latest approach from the head of the company’s Americas operations,
Paul Naude
, is under consideration. The problem for Inman is if the bid fails she is likely to lose the experienced Naude. Billabong’s chief financial officer also jumped ship in December.